Aemetis, Inc

Good day, everyone. Welcome to the AMETIS First Quarter 2025 Earnings Review Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Todd Waltz, the Executive Vice President and Chief Financial Officer of AMETIS. Mr. Waltz, you may begin.

Thank you, Kelly, and welcome, everyone. Before we begin, I'd like to remind everyone that during this call, we'll be making forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995. These statements are based on our current expectations and belief and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, but are not limited to, those factors discussed in our earnings release issued today and in our most recent Form 10-K filing with the Security and Exchange Commission under the caption, Risk Factors and management discussion and analysis of financial condition and results of operation, as well as in our other filings with the SEC. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments, or otherwise, except as required by law. Please refer to our earnings release and our SEC filings for a more detailed discussion of the risks and uncertainties. Full financial details can be found in our Q1 2025 earnings release and form 10Q available on the AMETIS website and EDGAR. I'll briefly highlight the key items. Revenues were $42.9 million, down from $72.6 million last year, primarily due to delayed biodiesel contracts in India. That business resumed shipments in April, and we expect revenue to rebound meaningfully in Q2. The Keys ethanol plant saw a revenue lift of $1.7 million due to stronger ethanol pricing, and RNG volumes were up 17% year over year. Operating loss was $15.6 million, reflecting a $1.6 million increase in SG&A, mostly legal and transaction costs related to the $19 million of cash we received from selling investment tax credits. That cost will not recur at the same level going forward. Interest expense rose to $13.7 million in line with our capital structure and investment base. We reported a net loss of $24.5 million, roughly flat versus Q1 last year. Cash at the end of the quarter was $500,000, following $15.4 million of debt repayment and $1.8 million of investment into carbon intensity reduction and dairy RNG expansion. As Eric will describe shortly, we expect multiple revenue streams from India, LCFS credits, and federal tax incentives to ramp up as the year progresses. positioning us for a stronger back half of 2025. Now, I'll turn it over to Eric McAfee, our chairman and CEO.

Thanks, Todd. Let me start with an update on our three core businesses, dairy, RNG, California ethanol, and India biofuels. In our dairy, RNG business, we're scaling gas production quickly. We expect to reach 550,000 MMBTUs of production capacity this year and grow to 1 million MMBTU annually by the end of 2026. We're now operating our building at 18 dairies backed by $50 million of USDA guaranteed financing. Seven of our dairy pathways have completed third-party verification and are in final review at CARB with approvals expected this quarter, unlocking meaningful LCFS revenue starting in Q3. At our ethanol plant, we've begun off-site construction of the $30 million mechanical vapor recompression system, This project is expected to reduce natural gas use by 80% and add an estimated $32 million in annual cash flow starting in 2026. We've already secured $20 million in grants and tax credits to help fund the system. Ethanol pricing has strengthened since earlier this year, and the recent EPA approval of summer E15 blending provides tailwinds for margin expansion. In India, we resumed biodiesel deliveries to government oil marketing companies in April, following a six-month pause in OMC purchasing. New OMC tenders have been issued, and the business remains EBITDA positive and self-funding. We're preparing for an IPO of our India subsidiary, targeting late 2025 or early 2026, and evaluating expansion into RNG and ethanol production in that market. Looking at future projects, Sustainable aviation fuel. We've received air permits and other permits for our 90 million gallon per year SAF and renewable diesel facility at the Riverbank site. When operated solely for SAF, capacity will be approximately 78 million gallons per year. We are in active discussions on financing structures and are awaiting further clarity on the 45C tax credit and state level SAF mandates to support project financing. In carbon capture at our riverbank site, we've completed initial drilling and pipe installation for our CO2 characterization well. The data we obtained from the next phase of drilling will support our classic sequestration permit application. Once permitted, the site is expected to sequester up to 1.4 million tons of CO2 annually. Regulatory tailwinds support strong growth outlook. AMETIS is positioned to benefit from a range of federal and state policies that directly enhance the value of our low-carbon fuel operations. The California Low-Carbon Fuel Standard. Amendments adopted by CARB to establish a 20-year framework for reducing transportation fuel emissions are expected to become effective within the next few months. Credit prices are expected to rise significantly as credit supply tightens and credit demand increases. What's provisional LCFF's pathways are approved, a Metis biogas could generate over $60 million annually from LCFS credits alone. Federal Renewable Fuel Standard. The sale of renewable natural gas qualifies for D3 RINs, adding $28 to $40 per MMBTU in value. When combined with LCFS credits, this represents up to $100 million in potential revenue from RNG in 2026. Section 45Z, Production Tax Credit. Effective January 1, 2025, this new federal incentive supports low-emission ethanol and RNG production. AMETIS is currently applying Treasury guidance to calculate and market these credits with additional clarification expected later this year. Section 48, Investment Tax Credits. AMETIS received $19 million in cash proceeds in Q1 2025 from the sale of solar, and biogas-related investment tax credits. The company expects additional sales of both investment and production tax credits in 2025. E15 ethanol blend expansion. The EPA has approved summer use of E15, a 15% blend of ethanol, in 49 states. And new legislation is advancing to allow year-round use, including in California. This would expand the US ethanol market by more than 600 million gallons annually and lower fuel prices for consumers. In California, Governor Newsom has directed CARB to expedite the process for allowing the sale of E15 gasoline in the state. And the state legislature is currently considering conforming legislation. Today, California is the only state that does not allow the sale of E15 gasoline. Implementing E15 in California will increase domestic U.S. demand for ethanol by over 600 million gallons annually. These aligned policy developments are expected to significantly strengthen MEDIS's revenue, cash flow, and project economics across its renewable natural gas, ethanol, carbon capture, and SAF segments. Looking ahead to full year 2025, We expect a significant ramp in RNG revenues starting in Q3, driven by LCFS pathway approvals and volume growth. India revenues are recovering with resumed biodiesel shipments. Ethanol margins will be supported by policy tailwinds in the near term and by the significant reduction in costs and increases in revenue planned from our NVR project beginning in 2026. We are monetizing tax credits and advancing development stage projects, including SAF and carbon capture. AMETIS is positioned for growth and improved cash flow in the second half of the year and continuing through 2026. Now let's take questions from our call participants.